Tangible Book Value

The value of a company’s physical assets minus liabilities.

QUICK ANSWER

Tangible Book Value represents a company’s net worth based on physical assets, excluding intangible assets like goodwill, patents, or brand value.

In depth

Tangible Book Value is calculated as Total Assets minus Intangible Assets minus Total Liabilities. It focuses only on physical, measurable assets such as cash, equipment, and property. This metric provides a conservative estimate of a company’s value, especially useful in liquidation scenarios. For startups, tangible book value is often low because much of their value comes from intangible factors like technology and growth potential. However, it can still provide insight into the company’s financial foundation and asset backing.

Example

Let’s consider a real-world example of a startup calculating its tangible book value.

Total assets: $500,000
Intangible assets: $200,000
Liabilities: $150,000

Tangible Book Value = $500,000 – $200,000 – $150,000 = $150,000